There were 40 merger and acquisition deals completed by registered investment advisory firms in the first half of the year, the strongest first half on record in terms of deal volume, according to data from Schwab Advisor Services.

The 40 transactions represented $30 billion in assets under management and the average deal size was $771 million. By comparison there were a total of 71 deals completed in all of 2009, representing $103 billion under management.

Dave DeVoe, a managing director of strategic development at Schwab, said that the industry experienced significant revenue and profit compression in 2008 and 2009, but as the market stabilized to a degree and businesses refined themselves to account for the new market environment, their profitability increased. So the uptick doesn’t really come as a surprise — even when reporting last year’s dip back in January DeVoe saw several leading indicators that indicated an M&A recovery was coming this year. These included improving cash flow, risk becoming more attractive and private equity coming back to the market.

“I think this is a return to that upward momentum that this industry had experienced before 2009 and is expected to experience going forward,” he said. “We had seen strong successive number of years for M&A. The structural decline was really driven by the stock market decline.”

Although the number of transactions reached record levels, the size of the deals declined. The $771-million average compares to an average size of just under $1.5 billion last year.

DeVoe said the number of sellers with under $250 million in assets used to comprise roughly a third of the total, but this year they account for 53%. He attributed the smaller transaction sizes to the natural lifecycle of a deal. They typically take about nine months to negotiate and the smaller ones are going to take less time to complete than larger ones.

DeVoe said that expects to see billion-dollar deals start coming through the pipeline soon.